Tuesday February 14, 11:30 PM Eastern Time
SOURCE: GameTech International, Inc.
RENO, Nev., February 14 -- GameTech International, Inc., a leading designer, developer and marketer of electronic bingo equipment and bingo systems, today announced financial results for the Company's fourth quarter and fiscal year ended October 31, 2005. Net income improved in the fourth quarter to $947,000 or $0.07 per fully diluted share compared with a net loss of $10 million, equal to ($0.84) per diluted share in the same period in 2004. The fourth quarter 2004 results included significant accruals due to litigation judgments ($3.6 million) and goodwill impairment ($6.6 million). There was no goodwill impairment at October 31, 2005 and net revenue for the fourth quarter reached $12.1 million, down from $12.6 million for the same period in 2004.
The Company realized net income of $1.3 million for fiscal year 2005 or $0.11 per fully diluted share in comparison with a 2004 net loss of approximately $9.9 million, after tax benefits, or ($0.84) per fully diluted share. Fiscal 2005 revenue was $49.7 million, 3.5% behind 2004 revenue of $51.5 million. The reduction in revenue can be attributed to the loss of certain accounts in late 2004 and unfavorable legislative changes in the state of Oklahoma, offset in part by increases in certain states and countries. On a comparative basis, increased profitability resulted from more favorable gross profit margins resulting from cost reductions in service and operations, savings in refurbishments and reduced depreciation of bingo devices. Operating expenses were significantly improved due to reductions in litigation costs, improved distributor commission arrangements, reductions in personnel related costs, and reduced, but more focused research and development project costs, partially offset by certain severance costs.
"Fiscal 2005 presented both challenges and opportunities for us. We have been able to recover from the reductions in revenue in Oklahoma with our expanding business in Michigan, Nevada and other states. We successfully concluded certain litigation and expanded our business in Texas, our leading market. Our business in Canada has increased 56% and our entry into the United Kingdom has proven successful and will continue to grow," said Jay Meilstrup, GameTech's President and Chief Executive Officer. "Although our revenue was slightly below the previous period, our cost savings, new program initiatives and operating efficiencies have increased more proportionately. We have strengthened our core management team and we are well positioned for continued profitable growth."
During fiscal year 2005, the Company recorded accrued costs related to certain severance matters. Severance costs approximated $1.0 million. Legal expenses were reduced following resolution of the Company's most significant legal matters. As of October 31, 2005, the Company had posted approximately $4.6 million in court appointed supersedes bonds supported by restricted short-term investments. Such action was taken in connection with the legal decisions under appeal.
"We are pleased to have resolved a number of issues we have faced and have re-focused our full attention on the growth and expansion of our domestic and international business, products and operations," added Meilstrup.
GameTech International is a leading developer and marketer of a comprehensive line of electronic bingo equipment, including hand-held bingo terminals, fixed-base terminals, and turnkey accounting and management software systems. The Company supports its bingo operator customers with products that typically increase play, revenue and profits, and with software customized to enhance management and operations, all backed by unparalleled customer service and support.
Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws, and GameTech intends that such forward-looking statements be subject to the safe harbor created thereby. Such forward-looking statements include our potential expansion of business internationally, our positioning for profitable growth, new product and product feature developments, the success of the strategic opportunities and initiatives, and expectations of the financial results and operating results of the Company, including revenue, profitability, and growth and income expectations for the current fiscal year. GameTech cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained herein. Such factors include those disclosed in documents filed by the Company with the Securities and Exchange Commission, including the Company's most recently filed Annual Report on Form 10-K.
GAMETECH INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
Three Months Ended October 31, Year Ended October 31,
2005 2004 2005 2004
(Unaudited) (Audited)
Revenue $12,141 $12,600 $49,651 $51,490
Cost of revenue 4,918 6,593 20,304 24,027
Gross profit 7,223 6,007 29,347 27,463
Operating expenses:
General and
administrative 2,306 3,102 11,406 11,154
Sales and marketing 2,898 3,102 11,952 12,561
Research and
development 1,038 1,498 4,058 5,179
Loss contingencies 0 3,628 137 3,628
Impairment of goodwill 0 6,625 0 6,625
Total operating
expenses 6,242 17,955 27,553 39,147
Income (loss) from
operations 981 (11,948) 1,794 (11,684)
Interest and other
income (expense), net 35 46 76 58
Income (loss) before
income taxes 1,016 (11,902) 1,870 (11,626)
Provision for
(benefit from)
income taxes 69 (1,920) 534 (1,720)
Net income (loss) $947 ($9,982) $1,336 ($9,906)
Basic net income
(loss) per share $0.07 ($0.84) $0.11 ($0.84)
Diluted net income
(loss) per share $0.07 ($0.84) $0.11 ($0.84)
Weighted average
number of common
shares
Basic 11,876 11,781 11,868 11,775
Diluted 11,941 11,971 11,960 11,775
Select Balance Sheet Data October 31, 2005 October 31, 2004
(Audited) (Audited)
Cash and cash equivalents $6,330 $6,101
Short-term investments $503 $2,605
Restricted short-term investments $4,581 $0
Total current assets $18,625 $15,327
Total assets $51,130 $51,679
Total current liabilities $7,801 $10,118
Total liabilities $9,241 $11,009
Total stockholders' equity $41,889 $40,670
Total liabilities and stockholders'
equity $51,130 $51,679
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Although EBITDA is not a measure of performance calculated in accordance with U.S. generally accepted accounting principles ("GAAP"), GameTech believes the use of the non-GAAP financial measure EBITDA enhances an overall understanding of GameTech's past financial performance, and provides useful information to the investor because EBITDA is used by virtually all companies in the gaming equipment sector as a measure of performance. However, investors should not consider this measure in isolation or as a substitute for net income, operating income, or any other measure in analyzing GameTech's performance that is calculated in accordance with GAAP. In addition, because EBITDA is not calculated in accordance with GAAP, it may not necessarily be comparable to similarly titled measures employed by other companies. A reconciliation of EBITDA to the most comparable GAAP financial measure, net income, follows:
Reconciliation of U.S. GAAP Net Income to EBITDA
(Dollars in thousands)
Three Months Ended October 31, Year Ended October 31,
2005 2004 2005 2004
(Unaudited) (Unaudited)
Net income (loss) $947 $(9,982) $1,336 $(9,906)
Add back:
Amortization and
depreciation $2,609 $9,764 $11,427 $18,309
Interest (income)
and other (income)
expense, net $(35) $(46) $(76) $(58)
Provision for
(benefit from)
income taxes $69 $(1,920) $534 $(1,720)
EBITDA $3,590 $(2,184) $13,221 $6,625